Gold, Silver Hit 4.5-Mo. Highs; Why More Upside Likely

(Kitco News) - Gold and silver prices both hit 4.5-month highs and ended the U.S. day sessionmoderately higher Thursday. An eroding U.S. dollar and a rallying crude oilmarket are bullish outside elements boosting the metals. February Comex gold was last up $7.40 an ounce at $1,363.80. March Comex silver was last up $0.136at $17.625 an ounce.

TheU.S. Dollar Index was solidly lower and hit another 3.5-year low today. Meantime,Nymex crude oil prices were firmer and traded above $66.00 a barrel, and hit amore-than-three-year high.

I'vecovered commodity markets on a full-time basis for 33 years. I've seen a fewcyclical ups and downs in the raw commodity sector during that time. Priceactions in many markets to start 2018 strongly suggest the raw commodity sectoris now starting a cyclical upturn. It appears much better times are ahead forraw commodity market bulls, including the precious metals. Following are someof my observations on why we have ended a bust cycle in raw commodities and areentering a boom cycle.

TheGoldman Sachs Commodity Index is a basket of raw commodity futures markets'prices rolled into one composite index price. The GSCI has been trending highersince early 2016 and just hit a more-than-three-year high. The solid priceuptrend on the weekly chart for the GSCI suggest more gains in the index in thecoming weeks and months, and even longer.

TheU.S. dollar index (USDX) is a basket of six major world currencies stacked upagainst the greenback. The weekly chart for the index shows prices are in anaccelerating downtrend. Most raw commodity markets are priced in U.S. dollarson world markets. When the dollar depreciates it makes those commoditiescheaper to purchase in non-U.S. currency. Importantly, in my years of following all the markets, trends in thecurrency markets tend to be stronger and longer-lasting than trends in othermarkets. As the U.S. dollar index continues to decline, such will continue tobe a bullish element for the raw commodity sector.

CrudeOil is arguably the leader of the raw commodity sector and has recently pushedabove what were strong technical resistance levels as prices now appear poisedto challenge $70.00 a barrel. Keep in mind that rising U.S. shale production inthe coming months could be the element that caps gains in crude oil. But rightnow the trend is up and there are no early chart clues to suggest a market topis close at hand.

U.S.Treasury Bond prices have been trending lower from their 2017 high. A dropbelow strong chart support just below the market at present seems likely andwould produce serious longer-term chart damage. The bear market in bonds and notes(rising yields, rising interest rates and rising inflation) is a positivedevelopment for hard assets like raw commodities. Hard assets have generallybeen a hedge against problematic inflation.

Technically,Februarygold futures prices closed near the session high and closed at a1.5-year high close today. The gold bulls have the solid overall near-termtechnical advantage, amid a six-week-old uptrend in place on the daily barchart. Gold bulls' next upside near-term price breakout objective is to producea close above solid technical resistance at $1,400.00. Bears' next near-termdownside price breakout objective is pushing prices below solid technicalsupport at $1,340.00. First resistance is seen at the September high of$1,365.80 and then at $1,370.00. First support is seen at today's low of$1,352.60 and then at $1,345.00. Wyckoff's Market Rating: 7.5

Marchsilver futures prices closed nearer the session high and hit a 4.5-month hightoday. The silver bulls have the overall near-term technical advantage. Silverbulls' next upside price breakout objective is closing prices above solidtechnical resistance at $18.00 an ounce. The next downside price breakoutobjective for the bears is closing prices below solid support at this week'slow of $16.735. First resistance is seen at today's high of $17.705 and then at$17.85. Next support is seen at today's low of $17.45 and then at $17.32.Wyckoff's Market Rating: 6.5.

March N.Y. copper closed down 120 points at 321.65 cents today. Prices closed nearthe session low on a minor downside correction from Wednesday's huge gains. Thecopper bulls have the overall near-term technical advantage. Copper bulls' nextupside price objective is pushing and closing prices above solid technicalresistance at the December high of 332.20 cents. The next downside priceobjective for the bears is closing prices below solid technical support at thisweek's low of 310.80 cents. First resistance is seen at today's high of 325.80cents and then at 327.50 cents. First support is seen at 320.00 cents and thenat 317.50 cents. Wyckoff's Market Rating: 7.0.

By Jim Wyckoff

For Kitco News

Follow @jimwyckoffjwyckoff@kitco.comwww.kitco.com Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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